Raising funds can be essential for early-stage startups to scale and realise their visions. Having angel investors and VCs on your cap table not only helps accelerates growth through capital, guidance, and partnership connections, but also validates that you have the right team and mindset to successfully execute your ideas.
Many founders don't realise that fundraising is a time-intensive process and may fall short by not taking the time to prepare and understand what it means and takes to raise funds.
Prior to going into fundraising and planning your strategy and approach, it is important to assess the overarching ambition and if the VC route is the right way to go.
Once you have assessed that fundraising is the right route to take, there are several important details to address.
Type
SAFE / SAFT, SAFE + Token Warrant…
Valuation
Target Raise Amount, Future Rounds…
Timeline & Utilisation
Fund Execution, Growth Plan, Exit Strategy…
Be realistic when it comes to how much to raise; evaluate in detail what amount will allow you to achieve your next milestones as well as what will bring enough cash runway for the next 18-24 months regardless of market conditions.
There are many different ways of financing that can be considered depending on your stage, financial positioning, and future fundraising plans. I’ve covered this previously here, but to reiterate, common vehicles are; SAFE (popular financing method developed by Y-Combinator); SAFT (alternate option in fundraising, exchanging capital on future distribution of tokens; SAFE + Token Warrant (combination of two vehicles).
It is important to assess the present value of your company in order to ensure that equity/tokens are set at a fair and correct price as well as to increase the ability to raise in future rounds. Once you have estimated the desired raise amount and structure (equity / tokens), the most common method used to validate valuation is through comparable analysis; comparison to companies of similar size, stage, and industry.